China Resources 2011 sales rise, expansion plans

China Resources Cement Holdings, reported a rise in revenues for 2011 and outlined plans for further capacity expansion. 

The company, which is the largest cement producer in South China, earned HK$4.18bn in net profit attributable to shareholders last year, reflecting YoY increase of 105 per cent.

Last year the company’s cement, clinker and concrete sales surged 49.4 per cent, 104.3 per cent and 28.4 per cent, respectively. Average cement sales prices increased 10 per cent to CNY369.5/t.

China Resources CFO, Robert Lau, said the company targets HK$6.2bn in capital expenditure, excluding funds for acquisitions. It aims to add 20Mt of cement capacity, bringing annual output to 89Mt by end-2014,

Mr Lau also said China Resources plans to raise the share of Hong Kong dollar-denominated loans to above 50 per cent of total loan portfolio as it seeks to take advantage of lower borrowing costs, a senior executive said.

He noted that the company would use loan facilities to fund its future expansion. He added that the company has no current plans to issue offshore yuan-denominated bonds in Hong Kong.
Of the total HK$20.49bn the company borrowed from banks last year, around 40 per cent was denominated in Hong Kong dollars. Lau said the cost of borrowing for yuan-denominated loans is around seven per cent much higher than around three per cent for Hong Kong-dollar loans, he said.

Meanwhile, Credit Suissse has lowered its target price for the company to HK$6.5 from HK$7.5 and downgraded the stock to ‘neutral’ from ‘outperform’. The research house expects cement margin to soften in 2012 and cut its earnings by 14 per cent for 2012 to reflect the soft margin outlook and weakness in its ready-mix concrete business.